TMI Blog1972 (12) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... which the deault continued but not exceeding in the aggregate 50% of the tax ? " The relevant facts may be briefly stated. The income-tax return of the respondent herein, who will be referred to hereinafter as the assessee, for the assessment year 1961-62, was due to be filed on or before September 28, 1961. The assessee did not file the return by that date nor did she apply for extension of time for filing the return. The return was filed on May 3, 1962, i,e., after a delay of about 7 months. When the Income-tax Officer proposed to levy a penalty for the late filing of the return, the assessee pleaded that her husband was ill and that she had to leave the station for a long period. She also stated that she was a regular taxpayer and the sources of income were salary on which tax was already deducted at source and share from registered firm for which returns were filed by the firms themselves. The Income-tax Officer held that the assessee was not prevented by reasonable cause from filing the return of income within the prescribed time. He, therefore, levied a penalty of Rs. 4,060 under section 271(1)(a) of the new Act. The assessee preferred an appeal before the Appellate Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty, it may be stated that on the date of the order of the Tribunal, there was divergence of opinion among the several High Courts on the question whether penalty could be levied under the provisions of the new Act when the default had occurred under the provisions of the old Act. This controversy has, however, since been settled by the Supreme Court in the case of Jain Brothers v. Union of India. Since in my view the rule laid down by the Supreme Court in that case affords guidance on the question which we have to answer in the present case, it is necessary to state the facts of that case and also some of the contentions which had been raised before the Supreme Court in that case and also the findings of the Supreme Court on such contentions. The assessee in that case was served with a notice on May 26, 1960, under section 22(2) of the old Act calling upon the assessee to file its return of income for the assessment year 1960-61 within 35 days of the service of the notice. The assessee did not file the return within that time, but filed it on November 18, 1961. The assessment was completed on November 23, 1964, under the provisions of the old Act. The Income-tax Officer, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was that the language of section 271 (of the new Act) did not warrant the taking of proceedings under that section when a default had been committed by failure to comply with the notice issued under section 22(2) of the old Act. This contention was also repelled with the following observations : " It is true that clause (a) of sub-section (1) of section 271 mentions the corresponding provisions of the Act of 1961, but that will not make the part relating to payment of penalty inapplicable once it is held that section 297(2)(g) governs the case. Both sections 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962, or any earlier year which is completed after first day of April, 1962, the proceedings have to be initiated and the penalty imposed in accordance with the provisions of section 271 of the Act of 1961. Thus, the assessee would be liable to a penalty as provided by section 271(1) for the default mentioned in section 28(1) of the Act of 1922 if his case falls within the terms of section 297(2)(g). " In support of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was right in levying the penalty under section 271(1)(a) of the new Act although the default had occurred under the provisions of the old Act. The Tribunal also upheld the action of the Income-tax Officer in levying the penalty under section 271(1)(a) of the new Act. The Tribunal, however, determined the quantum of the penalty with reference to the provisions of section 28 of the old Act which only prescribed a maximum penalty and did not prescribe a minimum penalty. The Tribunal did not give any reasons for determining the quantum of penalty with reference to the provisions of section 28 of the old Act, but merely followed the order of the Tribunal in another case. That order of the Tribunal is not before us and I am, therefore, not aware of the reasons given by the Tribunal in the said order except what has been stated in the order of the Tribunal in the present case, namely : " that since the default was committed at the time when the Indian Income-tax Act, 1922, was in force, the penalty must also be in consonance with that Act, and, therefore, it was urged that the discretion in fixing the quantum of penalty should be exercised with reference to the provisions of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eater than that which might have been inflicted under section 28 of the old Act. Under clause (i) of sub-section (1) of section 271, the maximum penalty that could be levied is 50% of the tax. Under section 28 of the old Act, the maximum penalty that could be levied was 1 1/2 times the amount of the tax. Therefore, the maximum penalty that can be levied under clause (i) of sub-section (1) of section 271 is not greater than the maximum penalty that could be levied under section 28 of the old Act. The question is whether the provisions to levy a minimum penalty under clause (i) of section 271(1) will amount to subjecting the assessee to a penalty greater than that which might have been inflicted under section 28 of the old Act when under the latter provision no minimum penalty was prescribed. In K. Satwant Singh v. State of Punjab, Satwant Singh was convicted under section 420, Indian Penal Code, read with section 10 of Ordinance No. 29 of 1943. The said Ordinance provided that whether or not a sentence of imprisonment was imposed by the Special Tribunal, a sentence of fine must be imposed and that fine shall not be less in amount than the amount of money or value of other property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in K. Satwant Singh's case. The rule laid down by the Supreme Court in K. Satwant Singh's case was applied by the Kerala High Court in P. Ummali Umma v. Inspecting Assistant Commissioner of Income-tax, in rejecting a contention similar to the one which has been advanced in the present case, namely, that section 297(2)(g) of the new Act by virtue of which a minimum penalty was imposed for a default committed under the old Act was violative of article 20(1) of the Constitution, and K. K. Mathew J. (as his Lordship then was) observed as follows : " The maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act. " Although in the case of Jain Brothers the Supreme Court was not considering the effect of section 297(2)(g) of the new Act in the light of article 20(1) of the Constitution, still the following observations of the Supreme Court in that case, in my view, afford sufficient guidance for the determination of the contention that has been raised before us on the basis of article 20(1) of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o suitable modifications. In other words, the procedure of the new Act will apply to cases contemplated by section 297(2)(j) of the new Act mutatis mutandis. Similarly the provision of section 271 of the Act of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with section 297(2)(g) of that Act. " Relying on the above observations, the learned counsel for the assessee contends that while levying penalty for a default committed under the old Act, the procedure to be followed is one prescribed under the new Act, the quantum of the penalty is to be levied with reference to section 28 of the old Act. I am wholly unable to accept this interpretation put on the observations of the Supreme Court. According to Chambers' Twentieth Century Dictionary, revised edition, the words mutatis mutandis mean "with necessary changes" and according to Webster's Third New International Dictionary, the words mutatis mutandis mean " with the respective differences having been considered ". In my view, the observations of the Supreme Court relied upon by the learned counsel only mean that section 271(1)(a) which reads as follows : " If the Income-tax Officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords " such penalty " in clauses (f) and (g) of sub-section (2) of section 297 of the new Act. According to the learned counsel, the words " such penalty " occurring in these two clauses mean the penalty which is imposable under section 28 of the old Act. The learned counsel has also referred to a judgment of this court in C.W. No. 1090/71, V. S. Malhotra v. Union of India delivered by my learned brother, Kapur J., on 15th February, 1972. The judgment relied upon by the learned counsel is clearly distinguishable and as my learned brother is delivering a separate judgment, I do not propose to give my reasons for my view that the judgment of the learned brother in the case referred to by the learned counsel is clearly distinguishable. It is sufficient for me to say that the words " such penalty " occurring in clauses (f) and (g) only mean the penalty which is referred to in the earlier part of the clauses (f) and (g) and they do not mean a penalty which is imposable under section 28 of the old Act. This brings me to a consideration of the last contention urged by the learned counsel for the assessee, namely, that clause (i) of sub-section (1) of section 271 does not prescribe a min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income ; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. " According to the learned counsel, the use of the words " not less than " in clauses (ii) and (iii) and the absence of similar words in clause (i) would imply that no minimum was fixed under clause (i). I am unable to accept this contention also. The only significance of the use of the words " not less than " in clauses (ii) and (iii) is that while the Income-tax Officer cannot impose a penalty which is less than the minimum prescribed under these two clauses, it is open to him to levy a higher penalty subject to the maximum prescribed under the two clauses. But, under clause (i), it is not open to the Income-tax Officer to levy a penalty at a rate of more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary under the provisions of the new Act also that the Income-tax Officer may choose not to inflict any penalty in the circumstances of a case. However, if he chooses to do so, then a yardstick for the determination of the penalty based on each month of the default is prescribed. This rather results in rationalising the exercise of discretion by the Income-tax Officer by providing a criterion when there was no such corresponding criterion prescribed under the old Act. " In P. Ummali Umma v. Inspecting Assistant Commissioner of Income-tax, the Kerala High Court held as follows : " The maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act. " In Commissioner of Income-tax v. Venichand Maganlal, the Rajasthan High Court again held as follows : " Section 271(1)(i) speaks in unequivocal terms that in the cases referred to in clause (a) a sum equal to 2% of that tax for every month during which the default continues, but not exceeding in the aggregate 50% of the tax was to be the amount of penalty. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 288(4) could be imposed on him in view of the fact that no such disqualification existed in the Indian Income-tax Act, 1922. He had been assessed for the year 1958-59, but the proceedings had been completed after the Act of 1961 came into force. In other words, the question was, whether the disqualification specified in section 288(4) of the Act of 1961 could be applied by reason of section 297(2)(g) of the Act. I came to the conclusion that it could not. One of the reasons I gave for this conclusion was that the disqualification specified in section 288(4) of the Act was not " such penalty " as could be imposed by virtue of that provision. In this case again, the question before us is whether the words " such penalty " occurring in section 297(2)(g) mean that the same penalty as specified in section 28 of the Act of 1922 can be imposed or whether the penalty mentioned in section 271 can be imposed. In relation to this subject, there are two provisions in section 297(2) of the Act of 1961 ; sub-clause (f) deals with those cases where the assessment has been completed before 1st April, 1972, and sub-clause (g) deals with the cases in which the assessment has been completed on o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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